Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

10. Commitments and Contingencies

As part of our acquisitions, we may commit to provide contingent payments to our sellers or lessees, upon the properties achieving certain rent coverage ratios. Typically, when the contingent payments are funded, cash rent will increase by the amount funded multiplied by a rate stipulated in the agreement. If it is deemed probable at acquisition, the contingent payment is recorded as a liability at the estimate fair value calculated using a discounted cash flow analysis and accreted to the settlement amount of the estimated payment date. If the contingent payment is an earn-out provided to the seller, the estimated fair value is capitalized to the property’s basis. If the contingent payment is provided to the lessee, the estimated fair value is recorded as a lease incentive included in the prepaid and other assets line item in our consolidated balance sheet and is amortized as a yield adjustment over the life of the lease. This fair value measurement is based on significant input not observable in the market and thus represents a Level 3 measurement. The fair value of these contingent liabilities are evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates. During 2015 and 2014, we recorded non-cash interest expense of $409,000 and $18,000, respectively, related to these contingent liabilities and the fair value of our contingent payments was $12,722,000 at December 31, 2015.

At December 31, 2015, we had commitments as follows (in thousands):


	Investment			2015		Commitment		Remaining
	Commitment			Funding		Funded		Commitment
Real estate properties (Note 5)	$	110,650	(1)	$	40,334	$	42,391	$	68,259
Accrued incentives and earn-out liabilities		16,300			805		805		15,495
Lease incentives		4,202			587		620		3,582
Mortgage loans (Note 5)		52,490	(1)		6,925		10,263		42,227
Joint venture investments (Note 6)		28,550			23,043		23,043		5,507
Notes receivable (Note 7)		2,725			283		408		2,317
Totals	$	214,917		$	71,977	$	77,530	$	137,387

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Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand senior housing and health care properties.

We are a party from time to time to various general and professional liability claims and lawsuits asserted against the lessees or borrowers of our properties, which in our opinion are not singularly or in the aggregate material to our results of operations or financial condition. These types of claims and lawsuits may include matters involving general or professional liability, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principals and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims.